Blockchain and IoT - Digital Transformation

This is the ‘Blockchain and IoT’ tutorial offered by Simplilearn. The tutorial is part of the Digital Transformation course and will help understand the basics of Blockchain and IoT with examples and learn the importance.

Objectives

At the end of this lesson, you will be able to:

• Explain blockchain and its advantages
• Discuss how industries are using blockchain technology
• Define IoT and its advantages
• Describe how industries are using IoT technology

The Evolution of Bitcoin

Bitcoin is one of the popular digital currencies available in the market today. With the current increase in the marketability of this cryptocurrency, people are curious to know about its origin. Bitcoin transactions are recorded and transferred employing a distributed ledger on a peer-to-peer network that's open, public, and anonymous.

The blockchain is the underpinning technology that maintains the Bitcoin transaction ledger.

What is Blockchain?

A blockchain is a distributed, secure, and transparent system of a record containing a log of transactions shared across a digital network. Each node on the network contains a complete replica of the blockchain data.

Blockchain Attributes

Blockchain Attributes include:

• Distributed Ledger: It is the digital version of the ledger to track and monitor data
• Peer-to-Peer Transactions: These are transactions where trading takes place directly between two parties
• Cryptography: It is the process in which the information embedded in a block is validated by the network nodes using cryptographic techniques

Distributed ledger is the most used blockchain attribute. Let’s look at the components of a distributed ledger.

Components of Distributed Ledger

The five components of the distributed ledger are:

1. The network of nodes: It is composed of the members and computers of the network. Nodes are responsible for the maintenance of the ledger and the verification of transactions.
2. Tokens: They are used as a unit of exchange or account in distributed ledger transactions. They are mostly referred to as "cryptocurrency" or "digital currency."
3. The structure: It defines how transactions are stored in the ledger. Most prominent is a concept called a “Blockchain.” A blockchain consists of electronically chained blocks that contain the transaction records of a given time period. As blockchain sums up all block, it represents the whole ledger.
4. The consensus mechanism: It prevents double spending and determines the “correct” version of the ledger. Double spending occurs if particular tokens are spent twice.
5. Rules: They set out a protocol for interactions between participants. Two of the most influential protocols are seen on the Bitcoin and Ripple networks. Whereas Bitcoin is a cryptocurrency with a built-in-payment system, Ripple is a payment system for arbitrary assets. The two protocols differ in their consensus mechanism, transaction fee policy, the creation of new tokens, and other aspects.

Let’s look at the advantages of the blockchain.

Advantages of Blockchain

As a peer-to-peer network, combined with a distributed timestamping server, blockchain databases can be managed autonomously to exchange information between disparate parties.

Blockchain networks can be used for "smart contracts" or scripts that automatically execute when certain conditions are met.

Blockchain Categories

The advantages of Blockchain technology is leveraged in two categories:

1. Public blockchains allow anyone who is a part of the consensus process to view or send transactions
2. Private blockchains restrict the ability to write to a distributed ledger to one organization

Now that you have learned the basics of blockchain technology, let’s look at how blockchain technology works.

How Blockchain Technology Works

Let us look at how Blockchain Technology works in detail.

• Blockchain leverages a decentralized network of computers that conduct intermediary tasks over the Internet.
• All transactions are recorded into a digital ledger, which is publicly available and fully distributed to all members of the network (so-called nodes). The distributed ledger (DL) approach eliminates the need for a trusted third party.
• As each network member holds a valid copy of the ledger, the network itself is able to certify asset ownership and clear transaction, providing a mechanism that offers higher security than the current central ledger approach.
• Transactions are visible to all network participants and are immutable once recorded.
• The distributed ledger approach could increase transaction speed and decrease costs because operations are performed peer to peer between the corresponding parties rather than indirectly through trusted third parties.

The application of blockchain is not limited to bitcoin and ripple. It has a crucial role to play in all sectors. Let’s analyze the applications of blockchain beyond the financial industry.

Applications of Blockchain Beyond the Financial Industry

Let us look at the applications of Blockchain in other Industries.

Logistics Management and Supply Chain Auditing

Blockchains can play a very important role in enhancing the security and efficiency of the storage/transfer of products (perishable goods in particular). Right from packing and storage to quality testing and distribution, every activity can be recorded on the distributed ledger, and all concerned parties on the network will be notified about the activities.

The data that has to be entered by users will vary across the different stages of the supply chain. With blockchains, auditing and establishing the authenticity of each step in the logistics system become easier and way smarter than ever before.

Example: Belgium-based Port of Antwerp, the second largest port in Europe by container capacity, is running a pilot blockchain project focused on logistics automation.

Healthcare

Blockchain helps in handling E-medical records accurately and securely and also enables the creation of smarter health information exchange models.

Example: SimplyVital Health is using blockchain technology in its new products Connecting Care and Health Nexus to streamline data and records to save time and money.

Utilities

Blockchain has helped in:

• Empowering and encouraging prosumers by building a trustless energy marketplace and transaction settlement system on Blockchain.
• Creating assets tracking management by building the underlying network of IoT devices on Ethereum Blockchains with smart contracts.
• Enabling metering technology for immutable and transparent metering and also auto linkage of meters with consumers’ digital wallets.
• Better power distribution and supply and demand balancing by the blockchain-enabled system for connected grids and real-time information flow.
• EV charging and sharing using e-Wallets for on-the-go transactions for electric charging, parking fees, and vehicle sharing.
• More efficient consumption driven by a blockchain-based trading platform where consumers can sell additional units of energy thereby reducing excessive consumption.
• Automated payment settlements in crypto tokens using smart contracts on the basis of actual usage measured on blockchain-enabled meters.

Like blockchain, IoT is also an evolving technology that enables people to build and create technology for the big change. Let’s discuss IoT in detail.

What is IoT?

Internet of Things (IoT) is the network or systems of interrelated computing devices, sensors, or other objects that have unique identifiers and can communicate with other devices on the network.

Advantages of IoT

The integration of IoT technology in one’s business has many benefits, which are:

• Helps businesses in making more informed decisions aided by the torrent of interactional and transactional data at their disposal
• Helps companies improve performance through IoT analytics and IoT Security to deliver better results
• Provides a platform for devices to represent themselves digitally and to control them from anywhere
• Facilitates connectivity by enabling to capture more data from different places, ensuring more ways of increasing efficiency and improving safety and security

Let’s understand how industries are leveraging this technology.

IoT: Impact on Industries

Let us look at the impact of IoT across various industries.

Insurance:

Erie, an American multi-line insurance company, uses IoT-enabled drones for inspecting a property in the event of a damage claim.

The use of the drone has benefited in many ways, from speeding up the claim process and looking at damage without endangering employees to getting a clearer picture of potentially fraudulent cases.

Connected Homes adoption helps customers in product bundling through the inclusion of home sensors along with non-insurance value-added home maintenance services during the policy purchase journey. For insurers, claims processing in this kind of product becomes simple as loss notification is routed automatically through sensors rather than the traditional way where the Insured reports the loss manually by filing a claim.

Usage-based Insurance: Auto insurance segment enables personalization, including being able to provide value-added services to customers. This is achieved through tracking vehicle data on driving patterns with the help of telematics devices fitted to the Insured’s vehicle.

As a result, the Insured needs to pay premium only for the actual distance traveled. This advancement, in turn, enables Insurers to retrofit their overall pricing, minimize claims ratios, and improve relevant Loss Adjustment Expenses.

Commercial Insurers who traditionally underwrite multilocation industrial units and heavy-duty machines and boiler units are now experiencing the power of Industrial connected devices capable of transmitting and communicating information in real time.

These devices help Insurers adopt a dynamic rating model that enables risk-based pricing for customers. This IoT-enabled approach accumulates new data points at frequent intervals by integrating property and location-specific attributes with traditional risk data. This, in turn, enables better risk evaluation, leading to effective risk management and loss minimization practices for Insurers.

Commercial Property Insurers using location-enabled GIS devices can now access advanced data to accurately assess risk exposure and use it to baseline their pricing in advance. Similarly, technology like Drones can enable timely underwriting and risk inspections, including providing proactive loss notification/ mitigation alerts during catastrophic events. Wearables that transmit the Insured’s fitness data on a regular basis help them avail pricing discounts in terms of Health, Disability, and Accident Insurance.

Banking:

Royal Bank of Scotland has an integrated RBS Assist chatbot for banking FAQs to DBS using Kasisto’s Kai AI platform that allows customers to conduct transactions like transfers and pay bills.

Travel and Hospitality:

Starwood and Hilton introduced IoT-based Mobile keys. Guests no longer need to wait in a queue at the front desk. With a mobile app integration, guests are notified when their room is ready. Once at the room, guests simply wave their phone in front of the lock to open the door. Mobile keys increase guest satisfaction and the likelihood of a customer booking a room through the hotel’s app or website.

Healthcare:

Startups like Augmedix and Obaa are using connected objects to improve the delivery of healthcare in hospitals and clinics and track treatments to boost the effectiveness of healthcare providers.

This is done using smart glass wearables like Google Glass that is used for healthcare charting.

Underwriting:

The convergence of different data types leads directly to increased precision in assessing risk, pricing policies, and estimating necessary reserves.

There are clear advantages over current approaches, which rely on backward-looking claims data and historical risk studies.

Through constant monitoring, underwriters can recommend real-time pricing and policy term modifications. They can also model the impact of new health and well-being services to manage mortality and morbidity risk over time.

Key Takeaways

Let us summarize what you have learned about Blockchain and IoT so far.

• A blockchain, originally blockchain, is a continuously growing list of records, called blocks, which are linked and secured using cryptography.
• As a peer-to-peer network, combined with a distributed timestamping server, blockchain databases can be managed autonomously to exchange information between disparate parties.
• Blockchain networks can be used for "smart contracts" or scripts that automatically execute when certain conditions are met.
• Internet of Things (IoT) is an ecosystem of connected physical objects that are accessible through the Internet.

Conclusion

With this, we come to an end about this Blockchain and IoT tutorial. In the next chapter, we will discuss 'Robotic Process Automation.'